Coverage Levels for Home Insurance Kaneohe HI
Coverage Levels for Home Insurance
Level of Home Insurance
Most home insurance policies do not cover 100% of the cost of your loss. The actual payment will depend on the level of home insurance coverage you have.
The least expensive and most common level of home insurance coverage is "actual cash value". This type of policy will pay the lowest percentage of your claim. The most expensive coverage is "Guaranteed or extended cash value". This coverage is not available for all types of homes.
Actual Cash Value - Home InsuranceActual cash value is what you would expect - you get the actual cash value of your building or belongings with your home insurance. What this means is that the home insurance company will calculate depreciation on your goods. Note that they will calculate depreciation on many items you would not expect them to - like jewellery.
When an aunt of mine had a very expensive ring stolen (appraised value over $7,000) the insurance company gave her only $5,000. Why? She had an "Actual Cash Value" home insurance policy. The home insurers calculated depreciation for the 5 years she had owned the ring - even though the price of gold over the same time period had increased significantly.
Now, in many cases, actual cash value may be sufficient. If so, just be sure to get a special endorsement or 'rider' for any item (like jewellery or antiques and collectibles) to which you would not want depreciation applied.
Replacement Cost - Home Insurance
Now, if you have this level of home insurance coverage, your home insurance company will pay the cost of rebuilding, repairing, replacing WITHOUT a deduction for depreciation.
You will pay more for replacement cost home insurance coverage. However, if you ever have to make a claim, you will at least get the full value of your item.
Replacement cost home insurance coverage has 'no surprises'. Whatever the value of your home or goods, you will get that amount.
Guaranteed or Extended Replacement Cost - Home Insurance
Guaranteed replacement cost is the 'Cadillac' of home insurance coverage levels.
Let's say your turn-of-the-century home burns to the ground. The Guaranteed replacement cost home insurance policy will pay to rebuild your home exactly as it was before the fire - even if it exceeds the policy limit. This even protects you if building materials surge in price after a disaster which affects a large area.
However, the guaranteed home insurance policy won't pay for upgrades required by changes to building code since your lovely home was originally built. In order to cover this possibility you would need a special endorsement called "Ordinance" or "Law" which will help to pay such costs.
Note that if you have an older home a replacement cost home insurance policy may not be available - precisely because of the costs associated with obtaining the same kinds of original materials. Older homes were often built with much higher quality woods and finishings than are standard today.